In a recent post, I discussed a legal claim known as “negligent hiring.” In a nutshell, an employer might face civil liability if (i) it knew, or upon a “reasonable inquiry,” would have learned, that a job candidate posed an unreasonable danger to co-workers, customers, or other third parties; (ii) it hired the person; and (iii) the employee caused injury to a third party.

Given this risk of liability, it’s no surprise that a prominent insurance analytics company warns employers to vigilantly work to prevent its occurrence. Such a warning can be perilously misleading to a business owner, however, if not accompanied by a reminder that state and federal laws put certain limits on the employer’s inquiry into, use of, and reliance on “prior conviction” information (among other types of information, such as evidence of poor credit). Indeed, an uninformed or overzealous effort to prevent “negligent hiring” exposure could lead to a different type of liability.

Laws governing “prior conviction”-related investigations and hiring decisions vary from state to state. Some states, for instance, restrict the time and manner in which a prospective employer may ask a candidate about prior convictions (e.g., only after a conditional offer has been made, or only in the course of an oral interview). Similarly, certain states put boundaries on the substance of conviction-related inquiries (e.g., no questions regarding “expunged” or “pardoned” convictions, no inquiring as to convictions from the distant past, or no questions regarding certain drug-related offenses). Further, some states explicitly curb the employer’s ability to disqualify candidates on the basis of prior convictions (e.g., no “criminal history”-based exclusion unless the history is reasonably related to the specific job at issue). Before implementing a “background check” system or a policy of disqualifying individuals based on criminal history, you must be sure to learn the requirements in your particular state.

Of particular danger to employers is the inadvertent commission, or at least alleged commission, of “disparate impact” discrimination under federal civil rights acts and certain state law equivalents. (This is not to be confused with the more common “disparate treatment” discrimination, which is intentional discrimination based on race, gender, or another “protected” characteristic. “Disparate impact” discrimination occurs where a policy simply has the effect of discriminating against a particular protected class of people – regardless of the perpetrator’s intent.) In short, an employer risks liability – and possibly the wrath of the Equal Employment Opportunity Commission (“EEOC”) – where its wholesale disqualification of certain classes of ex-convicts disproportionately hits a protected class of protected individuals.

This risk is illustrated in EEOC v. Freeman, Case No. 8:09-CV-02573-RWT, a matter currently pending in the United States District Court for the District of Maryland. Freeman involves, among other things, a convention/exposition service company’s policy of excluding certain job candidates (from certain positions) based on criminal history. According to one of the company’s legal briefs, the business previously “had experienced embezzlement, theft, drug-related accidents and incidents, and even workplace violence by its employees.” The company claimed that its current policy, which focused heavily on those who had committed violent crimes, successfully “screened out some persons who subsequently [were] sentenced to long prison terms or committed subsequent offenses.”

In the EEOC’s view, however, the policy violated various federal civil rights statutes. The hiring criteria, according to the EEOC, disproportionately excludes black, Hispanic, and (quite interestingly) male applicants because (i) those criteria are “not job-related,” (ii) the criteria are not “consistent with business necessity,” and (iii) there exist “appropriate, less-discriminatory alternative selection procedures.” The EEOC further argues that the company has made too little effort to sift through the specific circumstances surrounding each applicant’s past offenses – circumstances that might reveal the lack of a legitimate threat.

Whichever party wins – or should win – the very fact-specific Freeman case is almost immaterial for purposes of the typical business owner. Even if the company ultimately “wins,” the lawsuit will have drained it of significant time and legal fees. A business’s goal should be to craft its “background-check” policy as carefully as possible so that it simultaneously protects against negligent hiring liability while minimizing the possibility of inviting conflict with state and federal standards. That means being aware of (and following) local legal requirements and making sure that any “no hire” policy is both relevant to the job responsibilities and unlikely to exclude large numbers of “harmless” applicants. It’s a tight-rope walk, and a business owner shouldn’t attempt it without first consulting a qualified employment lawyer.